External cost of coal based electricity generation: A tale of Ahmedabad city

Electricity production causes unintended impacts. Their exclusion by the market leads to suboptimal resource allocations. Monetizing and internalizing of external costs, though challenging and debatable, leads to a better allocation of economic resources and welfare. In this paper, a life‐cycle analysis (LCA) on the production of electricity from conventional coal based electricity generation system has been performed in order to examine the environmental impacts of coal based electricity generating systems in the twin‐city of Ahmedabad and Gandhinagar in western India. By using dose–response functions, we make an attempt to estimate the damages to human health, crops, and building materials resulting from the operation of coal power plants and its associated mines. Further, we use geographic information system to account for spatially dependent data. Finally, monetary values have been assigned to estimate the damage to human health, crops and building materials. This study reveals that the health as well as on non‐health impacts of air pollution resulting from coal based electricity generation may not be ignored both in absolute as well as economic value terms.